Debunking American Petroleum Institute Claims About Oil Issues

Associated Press Investigation: There is “no statistical correlation between how much oil comes out of U.S. wells and the price at the pump.”

by Daniel J. Weiss, Rebecca Leber, and Jackie WeidmanCLAIM: “More domestic production is critical to putting downward pressure on gasoline prices — supply matters.” — Jack Gerard, American Petroleum Institute President and CEO, March 26, 2012

TRUTH: To test whether more U.S. domestic production would lower gasoline prices, the Associated Press just completed an exhaustive analysis of 36 years of monthly U.S. oil production and gasoline price data. AP found that there is:

“No statistical correlation between how much oil comes out of U.S. wells and the price at the pump. If more domestic oil drilling worked as politicians say, you’d now be paying about $2 a gallon for gasoline. Instead, you’re paying the highest prices ever for March.”

An organization set up by API, “Energy Tomorrow,” actually acknowledges that oil prices are set on a global market, with many different factors affecting its price. Most of these elements are beyond control of the United States.

“Crude oil prices are set globally through the daily interactions of thousands of buyers and sellers in both physical and futures markets, and reflect participants’ knowledge and expectations of demand and supply. In addition to economic growth and geopolitical risks, other factors, including weather events, inventories, exchange rates, investments, spare capacity, OPEC production decisions and non-OPEC supply growth all figure into the price of crude oil.”

U.S. oil production is not listed as one of the factors affecting price.

CLAIM: “Opposition to higher energy taxes is rising among the public. A recent ‘What is America Thinking on Energy Issues’ poll showed that 76 percent of voters think that higher energy taxes could equal higher gas prices.” — Jack Gerard, API President and CEO, March 26, 2012


TRUTH: A Center for American Progress Action Fund poll conducted March 10–13, 2012 by Hart Research provided respondents with fourteen policy options asked which “would help a lot to address the issue of gasoline?” The following option was chosen by 55 percent of the respondents:

“Repeal the four billion dollars per year in federal subsidies that currently are given to the oil companies, and use that money instead to fund investments that will make us less dependent on oil.”

Another 22 percent said that this proposal “would help somewhat.” The combined totals finished highest among all the options.

A Yale University poll released in February 2012 found similar steep opposition to subsidies for oil and other fossil fuels:

“As of November 2011, a large majority of Americans (70%) also opposed federal subsidies for the fossil fuel industry (coal, oil, and natural gas), including majorities of Republicans, Democrats, and Independents.”

CLAIM: “API represents more than 500 oil and natural gas companies…that…supports 9.2 million U.S. jobs.” — Jack Gerard, API President and CEO, March 26, 2012


TRUTH: Using API’s NAICS criteria (codes for various occupations) with Bureau of Labor Statistics data, CAP estimates that there were 1,790,000 employees in the oil and gas industry in 2011. Of these, 828,000 — or 46 percent — worked at gasoline stations.

CLAIM: “Raising taxes will not lower energy prices for American families and businesses — in fact, the Congressional Research Service says this plan could cause gasoline prices to go higher.” — Jack Gerard, API President and CEO, March 26, 2012

TRUTH: A Congressional Research Service memo, “Tax Policy and Gasoline Prices” to Sen. Harry Reid (D-NV) determined that eliminating tax breaks for big oil companies would have little impact on the price of gasoline. Here is a summary of CRS’s conclusion of the impact of eliminating specific tax breaks for big oil:

“Section 199: With current prices at, or near, $100 per barrel in the United States, it is unlikely that firms will slow production, or close wells with the loss of the Section 199 deduction.

“Intangible drilling costs: The Wood MacKenzie study did not conclude that U.S. gasoline prices would be affected by the tax changes.

“Dual Capacity Rules: [Elimination of] this provision…should have no effect on the firms output or pricing decisions, and therefore no effect on the price of gasoline.”


“General Considerations: The total expected tax revenues are only 5% of the earnings of the five largest firms in the industry and a smaller percentage of the total industry.

CLAIM: The administration “says it is for natural gas, but 10 federal agencies are looking at new regulations that could needlessly restrict it.” — Jack Gerard, API President and CEO, March 7, 2012

TRUTH: Nothing of the sort is underway. Minority staff of the House Energy and Commerce Committee thoroughly investigated this claim, and debunked it.

“In a fact sheet supporting the 10-agency assertion, API lists numerous agencies that don’t even have legal authority to regulate hydraulic fracturing.[29] For example, API lists the Centers for Disease Control as one of the agencies considering new regulations. In fact, the basis for this claim was the suggestion by a single CDC scientist that more research is needed to understand the potential public health impacts of drilling.[30] API also lists NOAA, but NOAA scientists simply published an article about air emissions from drilling in a scientific journal.[31] API even includes the State Department on the list, when in fact the Department is actually promoting shale gas drilling abroad to ‘further U.S. economic and commercial interests.’[32]”

CLAIM: “The industry receives not ONE subsidy, and it is one of the largest contributors of revenue to our government of any industry in America.” — Jack Gerard, API President and CEO, February 23, 2012

TRUTH: Numerous Republican leaders have noted that a tax break is the same as a direct government or subsidy, in a different form. This includes President Ronald Reagan’s chief economic advisor, Martin Feldstein, former Senate Budget Committee Chair Pete Domenici (R-NM), House Ways and Means Committee Chair Dave Camp (R-MI), and Speaker of the House John Boehner (R-OH).

Feldstein: “These tax rules — because they result in the loss of revenue that would otherwise be collected by the government — are equivalent to direct government expenditures.”

Domenici: “Many tax expenditures substitute for programs that easily could be structured as direct spending. When structured as tax credits, they appear as reductions of taxes, even though they provide the same type of subsidy that a direct spending program would…”

Camp: “‘Tax expenditures’ [are] provisions that technically reduce someone’s tax liability, but that in reality amount to spending through the tax code.”

Boehner: “What Washington sometimes calls tax cuts are really just poorly disguised spending programs.”

CLAIM: “Oil production on federal lands is flat, and oil production on federally controlled offshore areas is down.”— API, “Energy Myths and Facts”, 2012

TRUTH: The Energy Information Administration reports that 3.7 quadrillion BTUs of energy from crude oil were produced from federal lands and waters in 2011. This is a 12 percent increase over the 3.3 quadrillion BTUs produced in 2008 under President George W. Bush. It is also more than was produced from federal lands and waters in 2006 and 2007.

Daniel J. Weiss is a Senior Fellow at the Center for American Progress Action Fund; Jackie Weidman is a Special Assistant for the energy team at the Center for American Progress; and Rebecca Leber is a Research Assistant with the ThinkProgress War Room.